Austerity alone will not rescue Malaysia

When it first became clear last summer that no country in Southeast Asia was immune to the currency turmoil, economists and politicians in the region had a hard time grasping the true nature of the problem.

Optimists insisted that the downward trend was merely a temporary glitch in the onward march of the region's economies. A handful of pessimists, on the other hand, argued that the crisis would have to be taken seriously and tough, even painful, steps would have to be taken.

Six months later, economists and politicians in Malaysia have clearly grasped the nature of the problem. The administration has intensified its austerity drive with cuts in civil service and entertainment allowances for government servants and freezing privatization plans. We endorse Malaysia's tough new stance. But we do not believe these measures on their own will solve the country's economic problems.

The trouble is that many people in Malaysia have no confidence in the government's policies or in the banking system. There is a widespread feeling that the Malaysian government has yet to come clean on the depth of its economic problems.

If the government truly wants to set the country on the path to recovery it must be more open and tell the people of Malaysia exactly how deeply the banks are in trouble. Economics is a question of human livelihood. And it is only human to resent any move that will jeopardize the economic benefits that many people in Malaysia believe they have earned.

This means there will be a lot of resistance to the austerity drive from the public at large. Even those who realize that the austerity campaign is aimed at easing the country's economic woes will ask: "Why should we have to foot the bill for a problem created by private investors and banks?" The government must answer this question by being more open and truthful about the true dimensions of the difficulties facing Malaysia.

-- The Hong Kong Standard